Realtors aim to ban service sales tax

Employees of a signature-gathering firm — hired by the Arizona Association of Realtors — deliver boxes of petitions to the Secretary of State’s Office Tuesday, July 3, 2018 to put a measure on the November ballot that would forever prohibit sales taxes on services. (Howard Fischer/Capitol Media Services)

PHOENIX — Arizona Realtors formally launched their bid Tuesday to ask voters to ban state lawmakers from ever taxing services, even if it also would reduce or eliminate taxes on other necessities — or even if legislators say the revenues are needed.

The Arizona Association of Realtors submitted more than 400,000 signatures on petitions to put a measure on the November ballot to constitutionally prohibit a state sales tax on services. That includes everything from their own services to medical care, barbers, lobbying services and weight-loss centers.

Holly Mabery, a Prescott real estate agent who chairs the effort, said the desire is to protect senior citizens and the poor from new taxes that a future Legislature might impose.

But Mabery acknowledged that the ballot measure, if approved in November, would prevent lawmakers from revamping what is and is not taxed in a way that actually might have more benefit to those on fixed incomes.

For example, Arizonans now pay taxes to purchase school supplies, clothing, over-the-counter medications and even adult diapers.

Under current law, lawmakers could opt to make those purchases tax exempt, making up any lost revenues by taxing selected services. Or they could expand the list of what’s taxable to include services and reduce the overall state sales tax rate from its current 5.6 percent.

But this initiative, if approved in November, would block lawmakers from taxing not just basic services like medical care but also accounting, advertising, public relations, travel arrangements, nail salons, portfolio management and investment advice. And that, Mabery said, is precisely the purpose of the initiative.

“It’s still a tax on services,” she said. “And the way we look at it, we want to draw a line in the sand that will absolutely protect Arizona taxpayers.”

And what of the taxes now imposed on items routinely purchased by the poor and elderly?

“That’s not what we’re talking about,” she said.

House Speaker J.D. Mesnard told Capitol Media Services on Tuesday that, from a policy standpoint, he’s never been a fan of sales taxes on services. But the Chandler Republican said it’s not that simple.

“From a philosophical standpoint on how government should be run, I tend to believe that public officials need the flexibility to govern,” Mesnard said. “So putting restrictions on their ability isn’t helpful.”

But Sen. David Farnsworth, R-Mesa, who chairs the Senate Finance Committee, has no such second thoughts.

“Taxes go up, up, up and government services are expanded tremendously,” he said.

Farnsworth said he believes it is important to restrain the ability of lawmakers to raise any new taxes “since I consider socialism to be the real enemy of our country.”

Mabery said there’s no guarantee that any action by Arizona lawmakers would be revenue neutral, with new taxes on services to replace the levy on certain products. She said the initiative also protects against adding services to the list of what’s taxable to generate more dollars.

“Just this year the state of Illinois discussed taxing services,” she said.

“And other states like North Carolina, Washington, and most recently Oklahoma, have all passed a tax on services.”

And Mabery said there are politicians in Arizona who have said they want to produce more revenues by expanding the list of what’s taxable.

That includes state Sen. Steve Farley, D-Tucson, who now is running for governor, who has pushed to expand what’s taxable to generate dollars for education. Fellow Democrat David Garcia, also in the gubernatorial hunt, also has said the state needs to review what is now exempt from sales taxes.

Republican gubernatorial hopeful Ken Bennett also has mentioned the idea of taxing services, but in the context of making the state less dependent on income taxes.

There already are some constraints on the ability of lawmakers to raise taxes.

A 1992 state constitutional amendment requires a politically difficult two-thirds vote of both the House and Senate for anything that increases state revenues. That applies to any tax increase, including a new one on services, that does not include a commensurate decrease in other taxes.

Mabery, however, brushed aside a question of whether it is good policy to remove that ability of two-thirds of the Legislature to impose services taxes as an option to maintain state services in times of economic distress.

“What we see is that amending the Constitution will actually protect Arizona’s economy by giving it sustainability,” she responded.

“If there is inconsistency in our economy, that’s usually where we see small business pack up and move out,” Mabery continued. “And that destabilizes our economy.”

The measure will be on the ballot if the Secretary of State’s Office determines that at least 225,963 of those signatures are valid.

That November ballot could be crowded with issues for voters to decide.

On Thursday, petitions are expected to be filed for a measure financed by a California billionaire to require Arizona utilities to produce at least half their power from renewable sources by 2030. That is being fought by the state’s utilities who point out that nuclear is not included in that list.

Also set for filing by the Thursday deadline are:

•Putting a “right-to-know” provision in the Arizona Constitution requiring the disclosure of all sources of funds spent to influence state and local elections;

•Legalizing the possession of marijuana;

•Imposing an income tax surcharge on individuals making more than $250,000 a year to raise money for education.

There also is a referral to let voters decide whether to expand who is eligible to use tax dollars to send children to private and parochial schools.

And state lawmakers want voters to approve two constitutional amendment, one to put curbs on the power of the Citizens Clean Elections Commission and the other to impose new annual cost-of-living adjustments to pensions of corrections officers, judges and elected officials.